IMPROVING PROTECTED AREA FINANCING IN THE LEUSER …

IMPROVING PROTECTED AREA FINANCING IN THE LEUSER LANDSCAPE

USAID LESTARI MARCH 2019

This publication was produced for review by the United States Agency for International Development. It was prepared by Tetra Tech ARD.

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This publication was prepared for review by the United States Agency for International Development under Contract # AID-497-TO-15-00005. The period of this contract is from July 2015 to July 2020. Implemented by: Tetra Tech P.O. Box 1397 Burlington, VT 05402 Tetra Tech Contacts: Reed Merrill, Chief of Party [email protected] Rod Snider, Project Manager [email protected]

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IMPROVING PROTECTED AREA FINANCING IN THE LEUSER LANDSCAPE

USAID LESTARI

MARCH 2019

DISCLAIMER

This publication is made possible by the support of the American People through the United States Agency for International Development (USAID). The contents of this publication are the sole responsibility of Tetra Tech ARD and do not necessarily reflect the views of USAID or the United States Government.

USAID LESTARI – Improving Protected Area Financing in the Leuser Landscape Page | iv

TABLE OF CONENTS Executive Summary ........................................................................................................................ 1

Introduction .................................................................................................................................... 4

Methods ......................................................................................................................................... 5

Key Findings .................................................................................................................................... 7

Recommendations ....................................................................................................................... 13

Conclusion .................................................................................................................................... 26

References .................................................................................................................................... 27

Appendix 1 .................................................................................................................................... 30

Appendix 2 .................................................................................................................................... 31

USAID LESTARI – Improving Protected Area Financing in the Leuser Landscape Page | 1

EXECUTIVE SUMMARY Protected areas (PAs) are critical for safeguarding biodiversity in Indonesia. They play an integral role towards achieving the Government of Indonesia’s global conservation commitments, such as the Aichi Biodiversity Targets1 under the UN Convention on Biological Diversity (UNCBD), the UN Sustainable Development Goals (particularly Goals 14 and 15) and Indonesia’s Nationally Determined Contributions under the UN Framework Convention on Climate Change (UNFCCC). Despite their importance, making PA management effective in Indonesia requires overcoming a multitude of challenges, such as insufficient human resources, poor infrastructure planning by other government agencies and high demand for their natural resources. Discussions on PA financing over the past decade have drawn similar conclusions in that PAs typically lack the funding needed to achieve their stated management objectives. A number of studies have also identified the critical funding gaps. However, a main limitation with these studies is that they provide only general estimates of the financing needs for PAs based on simplified cost per hectare calculations using generic monetary values. Whilst these studies have enabled a greater understanding of the general needs, PAs differ in their management objectives, the types of threat, size, their accessibility and many other characteristics. In order to inform the development of a robust PA conservation strategy, the site manager, government decision makers, donors and partnering conservation NGOs require detailed site-specific information. As part of the USAID LESTARI project, this report investigates the financing trends, needs and gaps of two case study PAs in Indonesia: i) The UNESCO World Heritage Site of Gunung Leuser National Park (GLNP), located in Aceh and North Sumatra provinces; and, ii) Rawa Singkil Wildlife Reserve (WR) in Aceh province, a deep peatland with the highest known Sumatran orangutan density. These two PAs form an integral part of the USAID LESTARI Leuser Landscape. However, the finding of this report has wide applications, including to the other LESTARI Landscapes that are located in the forest, carbon and biodiversity rich forests of central Kalimantan, South Kalimantan and Papua, as well as to other PAs in Indonesia. In this report, we analyze the PA annual budget allocation trends from 2012 to 2017 and then conduct an in-depth analysis of the 2017 budget to determine whether the respective allocations are sufficient to support the effective management of these areas. The report then presents its findings from a financing gap analysis conducted for GLNP and Rawa Singkil WR under different management scenarios, from which the options for removing these gaps are presented. From 2012 to 2017, the central government budget allocation had a nominal annual average change for GLNP (-0.56%/year), but a relatively large decrease for Rawa Singkil WR (-9.09%/year).

1 https://www.cbd.int/sp/targets/


In 2017, the central government provided most of the funding for GLNP (IDR 30.6 billion or 78% of the total investment) and for Rawa Singkil WR (IDR 933 million) with the remaining financial support coming from bilateral, multilateral and NGO projects. The majority (53%) of Government funding in GLNP was for staff salaries, whilst the partner contributions (22% of the entire budget) were mainly for supporting strategic management interventions, such as ranger patrols and biological monitoring. In Rawa Singkil WR, Government funding was split between staff salary (30%), technical management activities (33%) and office operational and procurement of goods (27%). No information was available on partner contributions for this reserve.

Our analysis revealed significant funding gaps. First, using the PA financing recommendations for developing countries of US$185/year/ha (James et al. 1999), we found that the 2017 Government investment in GLNP was approximately 200% lower than this recommendation and in Rawa Singkil WR was approximately 900% lower. Second, our more detailed site-specific calculation of the financing needs for basic management activities for GLNP and Rawa Singkil WR using the standard cost of activities issued by MoEF in 2018 reveals a financing gap of 10% for GLNP and 98% for Rawa Singkil WR. Third, the financing needs under the ‘optimum scenario’, whereby the at-risk forest areas identified in this study receive sufficient conservation investment, and the ‘minimum scenario’, whereby only those forest areas at the highest risk are targeted, revealed that: GLNP needs an additional 140% (~IDR 42.7 billion) and 60% (~IDR 18.2 billion) respectively in its 2017 Government budget allocation; and, Rawa Singkil WR requires an additional 164% (~IDR 1.5 billion) and 129% (~IDR 1.2 billion) respectively. These are considered to be conservative estimates because they only provide support for the basic management activities and exclude set up costs, such as training and equipment purchase. We therefore stress that these figures should be used with caution particularly for in-depth financial planning, a PA budget should be explicitly calculated based on its comprehensive management plan. This should include accurate costing that are based on actual prices at the site level, as these may vary amongst provinces. This is likely to further increase the costs and financial gap, especially for management interventions that at present largely depend on external and, therefore, unsustainable funding sources. The results of this study are important because weak PA management will lead to environmental degradation that will be more expensive to subsequently address. To secure the sustainable protection of these PAs, increasing Government budget allocations is the top priority. However, considering that government budget allocations for forestry sector in the last five years has remained stagnant and in light of competing development priorities in Indonesia that require increased funding, the GLNP and Rawa Singkil WR authorities should work towards increasing the effectiveness and efficiency of budget planning and implementation. Funds from the central Government, particularly the Non-State Tax Income, are crucial for supporting technical activities on the ground. The amount and disbursement time should be in line with site needs and timetabled activities, but our study finds that this often does not happen.


For GLNP and Rawa Singkil WR, our financial analysis focuses on supporting four core activities: Ranger patrols; Biological monitoring; Human-wildlife conflict mitigation; Community partnership; and additionally for GLNP, Tourism management. To sustainably finance these activities, we identify four complementary approaches. From the various ways to support these approaches, we make recommendations only on the options that could most feasibly be achieved within a 1-3 year timeframe. In the first set of actions, we strongly advocate for an increase in the budgets of GLNP and Rawa Singkil WR. However, without first improving efficiency in how PA funds are spent, adding new money is unlikely to be cost-effectively used. We therefore make recommendations on how greater efficiency can be achieved. 1) Improve financial management efficiency of existing funds

• Action 1.1. Provide training for GLNP and Rawa Singkil Wildlife Reserve staff in financial planning to support the development of a short-term management plan (Rencana Pengelolaan Jangka Pendek, RPJPn).

• Action 1.2. Support a review of human resource allocations in relation to the requirements for achieving the PA management objectives.

• Action 1.3. Facilitate a discussion on the national budget tracking process and tools for PA financial management.

• Action 1.4. Facilitate national level discussions on the different financial tracking tools available and support the application of an appropriate tool/s in the USAID LESTARI PAs.

2) Increase state budget allocation

• Action 2.1. Facilitate a meeting with MoEF, Ministry of Finance and BAPPENAS to disseminate the findings and recommendations in this report.

• Action 2.2. Develop a persuasive narrative for why PAs are important and should be adequately funded.

In the second set of actions, we focus on alternative financing sources and mechanisms in the PA buffer zone. We make recommendations that should reduce the external pressures at the PA border, such as those caused by forest conversion through smallholder farmland expansion, and that would enable parallel forest and wildlife conservation efforts, such as community patrolling. 3) Leverage local government and community support

• Action 3.1. Support the development of fully functioning Forest Management Units (Kesatuan Pengelolaan Hutan, KPH) V and VI.

• Action 3.2. Support the leveraging of Village Funds (Dana Desa) in priority buffer zone villages.


4) Attract private sector support for sustainable agricultural practices • Action 4.1: Initiate a collective responsibility approach for the Leuser Landscape.

The options for sourcing external funds and partnerships are diverse. However, there are several limiting factors for leveraging this support. There is a lack of capacity and incentives at the site level for pursuing these options and direct PA funding will require the creation of new legal frameworks and delivery mechanism. In turn, this will require achieving broad collaboration across Ministries, such as Environment and Forestry, Finance and BAPPENAS, as well as Parliament. A strategic approach to achieving short-medium terms gains in improving PA financing for GLNP and Rawa Singkil WR will be through assisting the central government to increase state budget allocations. However, over the longer-term (>5 years) we recommend developing options for private sector investment in buffer zones so as to complement central government funding for inside the PAs.

INTRODUCTION Protected Areas (PAs) are a mainstay strategy for conserving biodiversity across the world. Yet despite their importance, it is widely believed that current spending on PAs across countries and ecosystems is grossly inadequate for meeting their management objectives (Emerton et al. 2006). Furthermore, financial support for PAs is disproportionately small compared to the multitude of benefits that they provide. If PA management is to be effective and these benefits sustained then improved funding, planning and enforcement is urgently needed, as called for in the CBD targets (CBD 2011). This situation is pertinent to the PA landscapes prioritized by USAID LESTARI. In Aceh, the USAID LESTARI Landscape covers GLNP and Rawa Singkil WR. Both PAs are critically important for the substantial contributions they make towards biodiversity conservation, climate regulation and rural livelihoods. The 828,279 ha GLNP is part of a UNESCO World Heritage Site tropical cluster of PAs in Sumatra. It is the only place on earth where tigers, elephants, rhinos and orangutan still co-occur. The vast rainforest extends beyond the PA border and in total covers approximately 2.5 million hectares. Despite the conservation efforts being implemented by the PA management authorities and NGOs, GLNP and the two other WHS PAs (Kerinci Seblat NP and Bukit Barisan Selatan NP) all face common challenges from agricultural encroachment, illegal logging, infrastructure development and poaching. As a result, they have been placed on the UNESCO List of World Heritage In Danger (UNESCO 2011).

The 82,374 ha Rawa Singkil WR is an intact peatland with an average depth of 3.8 metres that reaches down as far as 10 metres. Its estimated peat volume of 3,584 M m3 contains a carbon stock volume of 541 M t CO2 (Deltares 2012). Of the estimated 11,701 Critically Endangered Sumatran orangutans in the Leuser Ecosystem, 1,269 occur in Rawa Singkil WR, which is well known for having one of the highest Sumatran orangutan densities across its range (Wich et al.


2016). However, the integrity of this peatland is under threat, primarily from illegal logging and oil palm encroachment (LESTARI 2016). In order to mitigate the threats facing both of these PAs, USAID LESTARI is providing capacity building support and technical assistance for key activities, such as SMART ranger patrols, species monitoring and livelihood support in their buffer zones. However, to sustain these efforts over the long-term will require changes that increase PA budget allocations and efficiency in their expenditure.

This report, which was conducted under the USAID LESTARI project, aims to: i) analyze the annual budget allocation trends from 2012 to 2017 for GLNP and Rawa Singkil WR; ii) conduct an in-depth analysis of the 2017 budget to determine whether the respective PA allocations are sufficient to support effective management; and, iii) estimate the financing gap for both PAs under different management scenarios, to then determine the options for removing these financing gaps. The report also provides a summary of the main approaches used to determine the financing gaps (‘Methods’) and presents the main results (‘Key Findings’). It ends with a set of actionable recommendations for inside the PA, outside of the PA in the buffer zone, and at the national level. We consider the wider options available for PA financing in the Leuser Landscape because these may be useful for future efforts but only summarize these options because they are not considered feasible over a 1-3 year timeframe.

This report is an English language summary that accompanies a comprehensive Briefing Report written in Bahasa Indonesia. Both reports are targeted primarily at the government and non-government agencies responsible for funding and managing GLNP and Rawa Singkil WR, but also includes options for private sector financing of management in the PA buffer zone.

METHODS Here we present a summary of the data sources and analytical techniques used to calculate the financing trends and gaps. The data presented in this report were obtained from several sources,

• A literature study that included 27 technical reports, scientific publications, unpublished government documents and government regulations (BKFKKRI 2018; BBTNGL 2013, 2016; BKSDA Aceh 2010, 2017; Bappenas 2018; Darajati et al. 2016; Emerton et al. 2015, 2016; Hartono 2008; Kaban 2011; Kemenkeu 2017, 2018; Kemenhut 2010a,b; KLHK 2017a,b; OJK 2016; Peraturan Pemerintah 2017; Pemerintah Republik Indonesia 1990, 2010, 2017, 2018; Prihadi et al. 2018; Siahaan 2006; Sudiyono 2012; Widyaningrum 2012). These consisted of work plans and budget documents, financial reports, performance reports of government agencies at the national level and subnational level units from GLNP, Aceh BKSDA, MoEF Planning Bureau and BAPPENAS.


• In-depth interviews with key persons from government agencies (MoEF, GLNP management authority, BKSDA Aceh and BAPPENAS) and from NGOs working in GLNP and Rawa Singkil WR.

The financial statements from the Directorate General for the Conservation of Natural Resources and Ecosystems (Konservasi Sumber Daya Alam dan Ekosistem, KSDAE), GLNP and Rawa Singkil WR, contained approximately 800-1,000 spending lines, which were classified into six categories (operations, procurement of goods, salary and allowance, technical management, PA set up2 and state budget cut3). These aggregated data were then used to calculate the budget allocated for each category. We compiled data from 2012-2017 and adjusted all monetary values for inflation, whereby annual figures for 2012-2016, were converted to a constant 2017 value using a GDP deflator for Indonesia. Within our calculations of financing trends from 2012-2017, we controlled for the year-to-year fluctuations, rather than only using two periods, with 2012 as the baseline year and 2017 as the second year. The budget gaps were calculated by first identifying the funds needed to support core conservation activities under two scenarios: ‘optimum scenario’, whereby all at-risk forest areas receive sufficient conservation investment, and the ‘minimum scenario’, whereby only those forest areas at highest risk are targeted. Pixels of at-risk forest were identified by using a GIS to map potential threats (illegal logging and deforestation) and their proxies, which are related to forest accessibility (also a key predictor of poaching). These factors included distance to the nearest village, elevation and the presence of people in the forest and were used to create a spatially-explicit threat risk map for the project area. A 2x2 km grid was then overlaid on this map and those grid cells classified as being at high risk to anthropogenic threats were identified for GLNP (600 cells) and Rawa Singkil WR (125 cells) and prioritized for protection under the ‘minimum scenario’ (Annex 1). Those grid cells that were classified as being at a medium or high risk were identified for GLNP (1,800 cells) and Rawa Singkil WR (180 cells) and prioritized for protection under the ‘optimum scenario’ (Annex 1). We then used an average unit cost per grid cell, based on our field data, for effectively protecting the total number of selected grid cells under each scenario. This value was compared to the 2017 budget allocation for each PA, from which the funding gap was determined. We also calculated the budget needs of GLNP and Rawa Singkil WR using the ‘standard cost of activities’ that was issued by MoEF in 2018 and compared this to the 2017 budget allocation.

2 ‘PA set up’ included funds for Rawa Singkil WR to establish itself as a Conservation Forest Management Unit from 2015-2017, with non-

recurrent funding allocated for renting and equipping a new office, as well as funds allocated in 2017 for management block (zonation) planning.

3 ‘State budget cut’ refers to funds that were originally allocated for a PA but not subsequently transferred due to unforeseen budget cut occurring during the fiscal year.


KEY FINDINGS PA financing trends from 2012 to 2017

The MoEF budget allocation was relatively small compared to a selection of other ministries (Figure 1). The annual trend for MoEF was almost unchanged (0.87%) from 2012-2017, but fluctuated from a high of IDR 7.15 trillion (2013) to a low of IDR 5.21 trillion (2014) and recovering to IDR 6.77 trillion (2017). There was no significant change in funding from the 2014 merger between the ministries of Environment and Forestry. This trend was in stark contrast to another ministry with an environmental mandate, the Ministry of Maritime Affairs and Fisheries, that had a budget increase of 4.07% from 2012-2017, but also underwent dramatic fluctuations from a low of IDR 6.52 trillion (2014) to a high of IDR 11.00 trillion (2016).

Figure 1. Central government budget allocation for several key ministries (source: Republic of Indonesia

budget note for APBN 2012-2017)


From 2012-2017, the budget allocation for KSDAE was between 22 and 28% of the total MoEF budget. This was the highest MoEF allocation for any of its thirteen directorate generals4. The budget absorption by KSDAE over this 5-year period was between 79.6% (2012) and 93.4% (2014). The majority of its 2017 budget was allocated for staff salary (41.0%), then procurement of goods and services (38.4%) and capital spending (20.6%). In the government financial report, the spending for technical activities at PA site level was classified under the procurement of goods and services. Comparing across the USAID LESTARI Landscapes, the 2012-2017 budget allocation trends in three of the project’s target PAs experienced a small increase, Bukit Baka Bukit Raya (2.8%/year), Sebangau (1.6%/year) and Lorentz (1.6%/year), but not for GLNP (-0.56%/year) or Rawa Singkil WR (-9.09%/year; Figure 2). There was a notable decrease in the 2014 APBN budget allocation for all of the PAs due to the MoEF budget cut (IDR 5.21 trillion) which was part of the central government’s budget austerity policy (Figures 1 and 2).

Figure 2. KSDAE budget allocation for several of the USAID LESTARI protected area landscapes. Data for

Rawa Singkil WR are only available for the years 2015-20175 Analyzing the government budget from 2012-2017 revealed the fluctuations. For GLNP, this increased from IDR 22.4 billion (2014) to IDR 32.4 billion (2015) before decreasing to IDR 30.6 billion (2017; Figure 3). Comparing amongst the four procurement categories, the greatest budget increase was for 'salaries and allowances' (an IDR 8.7 billion or 82.8% increase), whereas the greatest decrease was for 'technical management' (IDR 3.9 billion or 52.1%).

4 In 2015, the Ministry of Environment and Ministry of Forestry were merged to become MoEF, which consists of 13 directorates. Prior to this,

the Ministry of Forestry had eight directorates. 5

Summarized from a detail budget of Conservation Areas in Indonesia provided by the MoEF Planning Bureau


Figure 3. Central government budget (APBN) allocation for GLNP

There was a significant budget increase for Rawa Singkil WR following its establishment as a Conservation Forest Management Unit in 2015, which made it eligible for an additional IDR 456 million or 4.1% of the BKSDA Aceh budget. These were dedicated funds for the reserve. In 2015, the Rawa Singkil WR management budget was IDR 1.2 billion, mainly to support the establishment of the management unit, with 'procurement of goods' receiving the largest allocation (39.3%; Figure 4). In part, this explains the overall budget decrease (IDR 0.3 billion or 24.9%) by 2017. However, there was not a proportional change in procurement category allocations because there were increases in technical management (96.2%) and salaries and allowances (27.7%), which is encouraging because this would support in-situ efforts such as ranger patrols, forest fire monitoring and community outreach (Figure 4).


Figure 4. Central government budget (APBN) allocation for Rawa Singkil WR

In-depth analysis of the 2017 budget

In 2017, the central government provided most of the funding for GLNP (IDR 30.6 billion or 78% of the total investment) and for Rawa Singkil WR (IDR 933 million) with the remaining financial support coming from bilateral, multilateral and NGO projects. The majority (54%) of government funding was for staff salaries, whilst partner contributions (22%) were mainly for supporting strategic management interventions, such as ranger patrols, biological monitoring and training. For GLNP, IDR 2.5 billion (or 8.2%) of the PA budget was allocated for technical activities. This included conservation of flora and fauna activities6 (58.9% of the budget allocated for the technical activities), utilization of environmental services, such as ecotourism management and identification of potential environmental services within the park (24.9%), and patrolling and securing the PA, preventing and controlling fires (16.2%). For Rawa Singkil WR, IDR432,900,000 (or 46.4%) of the PA budget was allocated for technical activities, including planning activities, PA border management, patrolling, fire control and community awareness raising. These activities were important because Rawa Singkil WR had just been designated as Forest Management Unit. The budget allocation for technical activities was mostly for planning and border management activities (IDR 160,650,000) and patrolling (IDR 40,600,000). Personnel expenditure, capital expenditure and operational goods to support the

6 Includes activities related to wildlife population monitoring and the management of species and their habitat, but not law enforcement.


office cost of Rawa Singkil WR, generally used funds originating from ’Rupiah Murni’7. Meanwhile, approximately 60-70% of the budget was used for area management operational activities using the budget from PNBP distribution and the rest comes from ’Rupiah Murni’. The budget from non-government sources received by GLNP and Rawa Singkil WR tended to be in the form of support for field activities and equipment. From 2015-2017, support from six NGOs and bilateral projects8, each holding its own annual work plan for joint activities with GLNP, totaled IDR 19.6 billion, an average of IDR 6.6 billion/year. This represented 21.4% of the state budget allocation in 2017, for managing GLNP. In 2017, four NGOs and two bilateral donor projects provided support for BKSDA Aceh in the management of Rawa Singkil WR, mostly on SMART patrol, mitigation of human wildlife conflict, and policy aspect. However, the data on their budget allocation are not recorded by BKSDA Aceh, which therefore precluded this type of calculation being performed. Management Effectiveness Tracking Tool (METT) scores

We used the assessments results from the 2017 METT scores for both PAs. The METT score for GLNP was 71% (previously 67% in 2015), which exceeds the KSDAE target score of 70%. METT identified several areas were management should be strengthened, namely:

• The PA management objectives have only been partially included in the annual work plans, making it difficult to fulfill the original objectives due to a lack of the full requisite of priority activities.

• Activities that need greater support were re-marking of the PA border, strengthening community involvement (e.g. through joint patrolling, awareness raising and education) in priority locations and SMART patrols in areas prone to illegal activities.

• Efforts were needed to upgrade nature tourism facilities and infrastructure, as well as supporting tourism operators through better engagement, training and comparative studies to other projects that aim to generate income through community-based activities.

The results from the METT financial section indicated the need for an increased PA budget allocation as documented in several questions (e.g. equipment). The three main questions related to the budget were:

• Is the current budget allocation sufficient? (Question 15) • Is there budget certainty? (Question 16)

7 Rupiah Murni refers to all GoI revenue, except income earned or received from project finances through foreign and/or domestic loans. Rupiah Murni can be used immediately after the central government approval of a Work Plan, Budget Plan and Budget Implementation Check List, which occurs at the beginning of January, each fiscal year

8 USAID LESTARI, WCS, Yayasan Orangutan Sumatera Lestari Information Centre (YOSL – OIC), Forum Konservasi Leuser (FKL), Veterinary Society for Sumatran Wildlife Conservation (VESSWIC), Yayasan Ekosistem Leuser (YEL), Yayasan Scorpion Indonesia (YSI)


• Is the budget managed to support the important activities for the management? (Question 17)

For all these questions, the low scores received for these questions are no different between the 2015 and 2017 METT assessments. Both sets of responses indicate that the national park is still struggling financially and relies on financial support from other sources (e.g. NGOs) to make up for its shortfall. The 2017 METT score for Rawa Singkil WR was 60%, which is lower than the national target of 70%. The areas identified for improvement and for raising a future METT score were:

• Lack of a long-term management plan • Weak implementation of actions to secure the PA border, which may result in conflicts

with other land users, such as oil palm companies • Revision to the management plan and the PA block management (zonation) have not

been completed • Insufficient budget allocations that needed to be adjusted support the PA management

plan • Poor coordination with the Directorate General of Law Enforcement to address forest

and wildlife crimes • Low capacity of PA staff • Poor communication and cooperation with the District/City governments and other land

users located around the PA

Similar with GLNP, the Rawa Singkil WR METT scores for the three METT budget questions were no different between the 2015 and 2017 assessments, which both indicated a limited budget availability. Financing gaps under different management scenario

Our analysis revealed three significant funding gaps. • First, using the PA financing recommendations for developing countries of

US$185/year/ha (James et al. 1999), we found that the 2017 Government investment in GLNP was approximately 200% lower than this recommendation and in Rawa Singkil WR was approximately 900% lower.

• Second, our more detailed site-specific calculation of the financing needs for basic management activities for GLNP and Rawa Singkil WR using the standard cost of activities issued by MoEF in 2018 reveals a financing gap of 10% for GLNP and 90% for Rawa Singkil WR.

• Third, the financing needs under the ‘optimum scenario’, whereby the at-risk forest areas identified in this study receive sufficient conservation investment, and the ‘minimum scenario’, whereby only those forest areas at the highest risk are targeted, revealed that:


GLNP needs an additional 140% (~IDR 42.7 billion) and 60% (~IDR 18.2 billion) respectively in its 2017 Government budget allocation; and, Rawa Singkil WR requires an additional 164% (~IDR 1.5 billion) and 129% (~IDR 1.2 billion) respectively. These are considered to be conservative estimates because they only provide support for the basic management activities and exclude set up costs, such as training and equipment purchase.

RECOMMENDATIONS ‘Sustainable financing’ at the PA level can be defined as the ability to secure sufficient funds from long-term, stable sources, that are disbursed appropriately and in line with conservation management objectives (Emerton et al. 2016). Our study reveals that financing for key conservation activities is neither sufficient nor sustainable, and that available funding is not well aligned with management objectives. For example, we found that less than 20% of the government PA budget is allocated for technical management activities, such as field patrols and biological monitoring. Such funding gaps are partly filled through direct donor support that is mainly from aid agencies and funds provided to partnering NGOs, which may additionally include that from private foundations, other governments, charities and the private sector. Despite many projects having worked continuously over several decades in key PAs, e.g. USAID investment in Leuser (IFACS and LESTARI, 2010-2021) and WCS in Bukit Barisan Selatan NP (1996-present), these funding sources cannot be considered as sustainable over the long-term. This is due to a risk of changing donor priorities, especially because the lending criteria, especially of bilateral donors, are expected to change in line with Indonesia’s projected economic transition towards becoming an upper middle-income country. Here, Malaysia provides a sobering example of the challenges faced by attaining this economic status. Its change was accompanied by a significant reduction in external aid agency funding that was not replaced by the government adequately investing in its PA system. Consequently, Malaysia’s tiger population, as one of its national indicator species, has undergone a rapid decline that leaves only three small subpopulations (Kawanishi 2015). The METT (Management Effectiveness Tracking Tool) assessments for the years 2015 and 2017 revealed an overall increase in the management scores for GLNP (67% to 71%) and Rawa Singkil WR (55% to 66%). However, for GLNP a financial sustainability scorecard assessment conducted in 2014 highlighted deficiencies in the PA system, with low scores recorded for legal regulatory and institutional frameworks (42%), business planning and tools for cost-effective management (24%) and tools for revenue generation (35%). In Rawa Singkil WR the condition is likely to be similar, but no such assessment has been performed.


For GLNP and Rawa Singkil WR, our study identifies 4-5 priority actions and their associated costs that are critical for effective PA management9 (Table 1). Table 1. Priority actions for effective PA management, whereby the ‘minimum’ scenario targets forest areas at the highest risk, as identified through a threat analysis and the ‘optimum’ scenario targets all at-risk forest areas

Essential activities 2017 budget Estimated cost (IDR) Minimum Optimum

GLNP Ranger patrols 335,880,000 12,002,210,667 35,748,898,667 Biological monitoring 140,580,000 3,478,834,764 4,268,434,764 Human-Wildlife Conflict Mitigation 0 545,835,036 545,835,036 Tourism management 604,410,000 1,056,976,630 1,056,976,630 Community partnership 105,760,000 672,766,200 672,766,200 Rawa Singkil WR Ranger patrols 40,600,000 767,563,664 1,090,361,011 Biological monitoring 0 260,790,000 260,790,000 Human-Wildlife Conflict Mitigation10 0 109,167,007 109,167,007 Community partnership 159,950,000 268,016,000 268,016,000

To sustainably finance these activities, we identify four broad approaches that are complementary, To address financing gaps within the PA, the approach should be to:

1) Improve financial management efficiency of existing funds 2) Increase state budget allocation

To secure the PA border through improved buffer zone management, the approach should be to:

1) Leverage local government and community support 2) Attract private sector support for sustainable agricultural practices

There are numerous ways to support these different approaches and each has its own merits and risks (Annex 2). We have, therefore, focused on recommending the options that are most feasible to be achieved within a 1-3 year timeframe (Annex 2). Below, we described these recommended actions and candidate partners, from government, civil society and aid agencies, for implementing them. We stress that there are other candidate partners and that a coordinated multi-partner response will be required. 9 Forest restoration was identified as being important in a recent UNDP/GEF/MoEF meeting but has not been included here because current restoration methods are primarily focused on replanting near primary forests and are both expensive and inefficient.

10 Do not specifically earmarked for Singkil in the BKSDA financial statement.


1) Improved financial management efficiency with existing funds

We strongly advocate for an increase in the budgets of GLNP and Rawa Singkil WR and a move towards robust performance-based budgeting. However, without first improving efficiency in how PA funds are spent, adding new money is unlikely to be cost-effectively used and this aspect of PA management must first be addressed. In 2007, the government budget for GLNP and Rawa Singkil WR were IDR 30,628,200,000 and IDR 933,400,000 respectively. Whilst this is not sufficient to fully protect the PA, used well it can still make a meaningful contribution to achieving the PA management objectives. However, low capacity in financial planning and management compounds the challenges of GLNP and Rawa Singkil WR in efficiently setting, spending and monitoring their budgets. Here, we make several recommendations at the PA level.

Action 1.1. Provide training for GLNP and Rawa Singkil Wildlife Reserve staff in financial

planning to support the development of a short-term management plan (Rencana Pengelolaan Jangka Pendek, RPJPn).

• Next steps: USAID LESTARI/WCS to support the GLNP and Rawa Singkil WR management authorities to run an RPJPn training workshop; and, support a study trip to learn from another PA that has developed an RPJPn

The RPJPn is an elaboration of the long-term (10 year) PA management plan, which contains information on the annual targets to be achieved. In line with Perdirjen No. P.14/KSDAE/SET/KSA.1/12/2017 on Pedoman Penyusunan Rencana Pengelolaan pada Kawasan Suaka Alam, Kawasan Pelestarian Alam dan Taman Buru, each PA must develop an annual RPJPn once the long-term management plan has been approved. The RPJPn should be developed in coordination with the budget and work plan (Rencana Kerja dan Anggaran Kementerian/Lembaga negara, RKA-KL), which will be submitted to DG KSDAE for review and approval. This means that the RPJPn activities are then accommodated within the RKA-KL for funding through APBN. The RPJPn should also include information on the activities that will be supported by the PA’s partners, such as NGOs and aid agencies. Thus, preparing the RPJPn provides a PA manager with the opportunity to make a compelling case for prioritizing activities under APBN funding. It also allows for targets, activities and allocated budget expenditure to be monitored and evaluated by the PA Manager, thereby acting as a financial tracking tool, which is currently lacking at the PA level. So far, the only PA in Sumatra to produce an RPJPn is Bukit Barisan Selatan NP, while Berbak-Sembilang NP is in the process of developing this plan. We also recommend a study trip to Bukit Barisan Selatan NP for the senior GLNP and Rawa Singkil WR staff to directly learn about the process for compiling an RPJPn and the experience with implementing it thereafter.


Action 1.2. Support a review of human resource allocations in relation to the requirements for

achieving the PA management objectives. • Next steps: UNDP GEF to recruit a PA management consultant to conduct a competency

standard assessment for GLNP and Rawa Singkil WR staff and, assuming their permission, support the revision of staff ToRs and the rotation of staff to ensure the allocation of the right people to the right position in line with the revised ToRs

MoEF Regulation No. P.9/MENLHK/SETJEN/KUM.1/1/2017 defines the required competence standard and qualifications for administration staff within MoEF. Other MoEF regulations provide technical guidance on functional position, such as No. P.9/Menhut-II/2014 on the implementation of forest ranger tasks. To improve efficiency with the current PA human resources, the staff need to have the skills, scope and knowledge to competently perform their assigned tasks. However, their respective tasks and functions must first be in line with the PA management objectives and clearly placed within an organizational chart. This is not always the case and efficiency could therefore be achieved by evaluating the types of human resources available, the needs and, from this, the gaps, to then develop an optimized human resources plan for each PA, with a clear set of ToRs for all staff. For example, the number of forest police (Polhut) is insufficient to fully deliver the patrolling scheme developed under the optimum and minimum scenarios. One solution could be to reduce the number of office-based staff to enable an increase in the number of field staff. At the national level, we make the following recommendations.

Action 1.3. Facilitate a discussion on the national budget tracking process and tools for PA

financial management. • Next step: Facilitate a meeting between USAID BIJAK/WCS and MoEF to discuss the use of

SIDAK11 as a more detailed financial tracking tool and, assuming a positive response, work with MoEF and the PA UPT to ensure financial data are routinely uploaded and monitored

MoEF does not evaluate the efficiency with which a PA uses it budget. National level monitoring is conducted to check the level of PA budget absorption, which is simply the percentage spent of the total budget. MoEF does not examine in finer detail how a budget is spent against corresponding line item allocations, nor does it consider expenditure in relation to the PA management goals12. This is a key area for improvement, but we cannot make specific recommendations on how this should be addressed because these must be formulated through inter-ministerial discussions. The first step here would be to meet with key personnel from MoEF to discuss this. We envision a single meeting to respond to several of the Actions (#1.3, 1.4 and 2.1) with MoEF and then MoEF and other ministries. 11 SIDAK (Sistem Informasi dan Data Konservasi Sumber Daya Alam Hayati dan Ekosistemnya) is a management information system that is used for in-situ and ex-situ conservation in Indonesia (Perdirjen No. P.13/KSDAE/SET/Ren.0/12/2018) 12 Government Regulation No. 90 year 2010 on the preparation of work plan and budget of state’s ministry/organization, Article 19


Action 1.4. Facilitate national level discussions on the different financial tracking tools available

and support the application of an appropriate tool/s in PAs.

• Next step: UNDP GEF to facilitate a meeting to evaluate the suitability of different tracking tools and discuss this national action with MoEF

GLNP and BKSDA Aceh partly rely on METT to assess how their respective budgets are used. METT is useful for providing general information on PA strengths, weaknesses, regional variations and progress over time. The PA financing sections of METT cover the current budget, security of budget, management of budget, commercial tourism fees and other fees. These report on the general financial situation and patterns and cannot therefore be used as a financial tracking tool. For example, in the current budget section, it is commonly the case that a PA will rate itself as being inadequately financed, but with little information on the amount of funding required and for which activities. We therefore recommend that METT is continued to be used as a high-level tracking tool, but recognize that it lacks the sufficient detail required to evaluate efficiency. A more appropriate tool for financial assessments and monitoring is needed. The MoEF/UNDP/GEF project entitled ‘Transforming Effectiveness of Biodiversity Conservation in Priority Sumatran Landscape’ is currently testing a financial sustainability scorecard to assess the financial status of the PA system in Sumatra, including GLNP. The scorecard is a results-based management tracking tool that assesses: i) the overall financial status of a PA system, including its costs, revenues and financing gaps both in the current year and as a forecast for the future; ii) elements of the financing system, focusing on legal, regulatory and institutional frameworks, business planning and tools for cost-effective management (e.g. accounting practices) and tools for revenue generation; and, iii) scoring to show the current situation in the PA system and the changes over time (ideally annually). As successfully done with METT, we recommend that UNDP GEF first evaluate whether this scorecard fits with the PAs that it is supporting and, if it does, then pilot the scorecard. Consideration may then be given to piloting a Financial Sustainability Scorecard at the PA level to directly inform the assessment being conducted at the PA system level. Next, the Directorate General of KSDAE is using SIDAK (Sistem Informasi dan Data Konservasi Sumber Daya Alam Hayati dan Ekosistemnya), which is underpinned by Perdirjen No. P.13/KSDAE/SET/Ren.0/12/2018. SIDAK enables MoEF to monitor PA budget allocation and expenditure, i.e. budget absorption. It is important to note that the accuracy of this system is dependent on how frequently information is uploaded by the PA. This may be as recent as the past month or could be 6-months out-of-date. Still, given the enthusiasm with which METT, and its easy to understand scoring system, has been adopted across the entire Indonesian PA system, consideration should be given to using a similarly designed tool for financial tracking. We therefore recommend supporting the utilization of SIDAK as a tool to evaluate the effectiveness of how the allocated budget is used. Currently SIDAK is used to monitor budget absorption and USAID LESTARI support for GLNP and Rawa Singkil WR should ensure that information on the


RPJPn activities and budget are regularly, e.g. monthly or quarterly, updated into SIDAK. USAID LESTARI should then monitor the usage and performance of SIDAK as a financial tracking tool through PA level and national level MoEF discussions.

2) Increase state budget allocation

Globally, the overwhelming majority of PA systems are not financially self-sufficient and heavily rely on central government funding for their operations. PAs are typically set up to protect biodiversity, secure ecosystem services and meet international commitments, such as those made under the CBD. These benefits usually provide sufficient justification for central government funding. We therefore recommendation that MoEF increase the funding for its PAs. We recognize that the funds required to achieve this for Indonesia’s 54 national parks, let alone the 521 conservation areas, would be significant. So, a phased approach might be needed, whereby Tier 1 national parks (Balai Besar), followed by Tier 2 national parks (Balai) and so on, are prioritized for increased funding. To address this need, we make the following recommendations. Action 2.1. Facilitate a meeting with MoEF, Ministry of Finance and BAPPENAS to disseminate

the findings and recommendations in this report.

• Next step: Support a meeting amongst USAID LESTARI/WCS and three ministries to discuss this national-level action by first discussing the key finding of this PA financing report

During the compilation of this report, it became clear that there was not a shared understanding amongst the difference ministries involved in the budgeting process of current PA funding shortfalls. This presents a major barrier to increasing state funding, especially where there is a perception that the current funds are sufficient for delivering PA management objectives and their Key Performance Indicators. We recommend a meeting to discuss this issue and also where greater efficiency could be achieved. This would include identifying ‘bottlenecks’ such as the incremental disbursement process, whereby varying amounts of funds are released over different months that have no association with a PA’s activity work plan. We recommend that USAID LESTARI first present this report to MoEF and, assuming a positive response, then support MoEF to host a tripartite ministerial meeting with the Ministry of Finance and BAPPENAS.

Action 2.2. Develop a persuasive narrative for why PAs are important and should be adequately

funded. • Next step: USAID BIJAK to recruit a consultant with expertise in developing influential

messaging (e.g. a social psychologist), which will be incorporated within one or more thematic infographics per target PA and disseminated to key stakeholders

Making a strong case for central government to increase funding of its PAs through demonstrating their importance for livelihoods, job creation, agricultural productivity and other


socio-economic aspects is necessary, especially when justifying proposed budgets for parliamentary approval. MMAF has shown that socio-economic arguments linked to gains in national GDP are more effective than climate or biodiversity arguments for securing increased funding. However, these arguments are often lacking for terrestrial PAs, which lack a sustainable fisheries equivalent. USAID BIJAK should support MoEF to develop a series of communication pieces that target those involved the budget decision-making process, as well as being for dissemination in the national media. One well-studied example investigated how the degradation of watershed forests by illegal logging and encroachment negatively impacted on downstream communities through increased flooding in Aceh. The findings revealed that there were 112 flooding events from 2010-2015 which displaced an estimated 223,000 people, damaged over 100,000 houses and large swathes of farmland and plantations (Leggett et al. 2016). A conservative estimate of the costs of this flooding was US$136 million over five years, or an annual average of US$27 million. This approach worked well in raising environmental awareness amongst parliamentarians in Aceh because it focused on describing the benefits provided by forest ecosystem services to >1 million people living within 5 km of the GLNP border13. To achieve this, we recommend an approach that learns from the experience of behavioral economics that studies how social and emotional factors influence economic decisions, using psychology and other disciplines. This can use the power of persuasion though carefully crafted messages to elicit desired behavioral change, such as compliance to regulations that leads to a significant increase in voluntary tax payments. We recommend employing a social psychologist or team to work with the USAID BIJAK and WCS to develop the persuasive messaging for increasing PA financing14. This should be incorporated within an MoEF infographic. 3) Leveraging local government support

PA management plans and budgets are not integrated with local government development plans, although many of the pressures that PAs face originate from outside of their border, especially those concerning agriculture, mining, settlement and infrastructure development. If PA management planning can be effectively communicated or integrated into development planning at the landscape level, and vice versa, then it is possible to negate these detrimental impacts. By extension, limited PA resources that might have been used to mitigate these threats can then be reprogrammed for other activities. To achieve this will require a strong relationship between the PA management authority and neighboring district governments, as well as a monitoring system to evaluate the performance of government supported buffer zone initiatives. We classify this type of local government support as ‘indirect financing’. In Aceh, indirect financing opportunities exist through leveraging District Government budgets for activities that improve PA border protection, such as community patrols, environmentally 13 https://cdkn.org/resource/report-aceh-archipelago-economy-protecting-forests-water-energy-food-security/ 14 For example: https://www.bi.team/ and https://www.influenceatwork.com/


sensitive land use planning, securing land tenure for communities and forest restoration in degraded areas at the park boundary. From other PA landscapes this approach has been shown to reduce encroachment pressure on PAs15. Non-traditional types of indirect local government support could include addressing human-wildlife conflicts (and retaliatory killings of tigers and elephants) through improved animal husbandry (with Dinas Peternakan) and compensating those injured or suffering other losses by wildlife (with Dinas Sosial). While potentially useful approaches, they will require a significant investment or time to create new partnerships and initiatives and are not, therefore, recommended in this report. Action 3.1. Support the development of fully functioning Forest Management Units (Kesatuan Pengelolaan Hutan, KPH) V and VI

• Next steps: KfW, with support from USAID LESTARI, to facilitate discussions amongst BKSDA Aceh, TNGL, KPH V and VI; and, strengthen the capacity of KPH V and VI management authority through training and technical assistance

One option to secure the borders of GLNP and Rawa Singkil WR includes strengthening KPH V and VI to conduct forest patrols, restoration and rural livelihoods. KPH VI’s long-term management plan acknowledges the need to collaborate with BKSDA Aceh and GLNP in addressing illegal logging and encroachment, conduct intensive forest patrols, monitor forest fires, and conduct community outreach related to the forest conservation issues. As each management unit has its own management plan, it will be important to facilitate discussions between the management units to synchronize their management plan, with a view to this resulting in joint plans being developed to then implement these activities. Thus, assisting the KPH in producing an RPJN and then discussing this with the national park, as way to fully consider this within it RPJPN, would be a significant towards effectively and efficiently sharing resources. Ideally, RPJN would be jointly developed to allow for greater synchronization of resources. For this Action, we recommend a leading role for the KfW project that is providing technical assistance for KPH development in the Aceh Selatan, Subulussalam and Aceh Singkil. These are key districts/city in the GLNP and Rawa Singkil WR buffer zones. The KfW project forms part of the German government's 'Support to Indonesia's Climate Change Response'. Developing KPHs is a multi-donor approach, for which USAID has been providing expert support across Indonesia and including Aceh. Thus, we recommend that USAID LESTARI provide technical advice in this action, but given the relatively short time remaining in this project, not get fully involved in KPH development. KPH V cover the districts of Aceh Selatan and KPH VI cover Singkil. While we see the longer-term benefits in establishing fully operational management units in the PA buffer zones, we caution that many of the financing and capacity challenges faced by GLNP and Rawa Singkil WR would

15 Angelsen, A. (2010) Policies for reduced deforestation and their impact on agricultural production. Proceedings of the

National Academy of Sciences Nov 2010, 107 (46) 19639-19644; DOI:10.1073/pnas.0912014107


also apply here. To support these KPHs will require investing significant time, money and energy into setting up fully-functioning and fully-resourced management units, which are under Provincial Forestry Agency. The KfW project may support Dinas Kehutanan Province to assess the current status of its KPHs, both institutional and staff capacity, to understand the potential and the challenges for setting up the fully functioning management unit. Based on that capacity gap assessment, KfW project and Dinas Kehutanan should formulate a capacity development plan. Action 3.2. Support the leveraging of Village Funds in priority buffer zone villages

• Next steps: WCS to map the priority villages in high risk and/or vulnerable areas to target as partners in the GLNP and Rawa Singkil WR buffer zones; and, GLNP and BKSDA Aceh to provide expert support to the priority villages to develop pro-conservation village development plan

We recommend exploring options that leverage additional finance to support activities through the Village Fund. Besides forest patrols and human-wildlife conflict mitigation (Boxes 1 and 2), these funds could also support smallholder farm mapping around the PA boundary to identify underutilized land for development as a way to reduce and ultimately reverse encroachment into GLNP and Rawa Singkil WR. There are two broad steps that we recommended here.

Box 1. Use of Village Fund for environmental protection in Pidie district, Aceh

Around 5,860 villages are located inside or adjacent to PA borders in Indonesia. In 2018, the Ministry of Villages, Disadvantaged Regions and Transmigration issued a regulation that allowed for the use of Village Funds for the provision of, development and maintenance of facilities and infrastructure for environmental protection. This includes the construction of terraces and reservoirs around water springs, prevention of forest fires and coastal erosion, or other initiatives that are decided by the village. As an example of how this is being applied in practice, the government of Pidie district issued a regulation (Peraturan Bupati Pidie No. 12/2018)16 that allowed for 15% of the Village Fund to be used for environmental activities, such as the establishment of village green spaces, watershed protection, village forest and mangrove protection, reforestation, tree nurseries and replanting of endangered trees species, and other relevant activities. The Pidie government issued this regulation because 487 villages (67% of all villages) in district are located in close proximity to the forest and keeping this intact is viewed as being vital to ensuring the environmental services, such as oxygen, a clean water supply and sources of food, for these communities17. Firstly, WCS could map the priority villages in high risk and/or vulnerable areas to target as partners. The approach here should learn from the USAID LESTARI site selection process conducted in its other landscapes, which included conservation threats assessment and identifying sub-watersheds with the greatest manageable threats. To conduct this work in the

16 Peraturan Bupati Pidie No. 12/2018 on the technical guidelines for prioritization the utilization of gampong (village) fund in

Pidie District on 2018. 17 https://www.suara.com/news/2018/11/25/083100/bupati-pidie-salurkan-dana-desa-untuk-lingkungan-hidup


field, the PA management authority and district government should be supported to develop locally relevant criteria to determine which areas/activities are posing a high threat or risk of threat to the PA. Threat data from SMART patrols (including poaching and illegal logging) and satellite imagery (deforestation) should be mapped and overlaid on the village, district and PA boundaries to facilitate this priority setting process. Box 2. Use of Village Fund for human-wildlife conflict mitigation in Aceh

GLNP and Rawa Singkil WR are surrounded by hundreds of farming communities, making human-wildlife conflict a frequent occurrence. From 2008-2017, WCS responded to conflict incidents, mainly involving tiger, elephant and orangutan, in 124 villages in the Leuser landscape. To empower communities with the means and knowhow to manage problem wildlife, WCS initiated the Masyarakat Desa Mandiri initiative in conflict-prone areas, starting in 2015. The initiative was implemented through the following steps: i) Develop village profiles by collecting a comprehensive data on a variety of factors, including social, economic (including livestock practices), demographic, cultural and problems with wildlife. This is then used to develop participatory human-wildlife conflict mitigation plans; ii) Improve community capacity to manage human-wildlife conflicts through trainings and visits to advanced Masyarakat Desa Mandiri villages; iii) Form a core group in the village to lead the human-wildlife conflict response; iv) Support the group to formulate a work plan and establish proper communication amongst village, sub-district and district government; v) Facilitate village meetings to integrate the human-wildlife conflict mitigation plan within the village development and budget plan; vi) Mobilize resources from the community and other parties to enable locally-led mitigation efforts; and, vii) Support the documentation of lessons learned and the sharing of them as part of a learning process amongst community groups and villages surrounding the PAs. The Village Fund could then be used for: Canal construction to limit elephant movements; Construction of guard posts; Community livelihood development; Procurement of conflict mitigation equipment; and, Capacity building of community groups in conflict mitigation techniques.

Secondly, we recommend that the GLNP management unit and BKSDA Aceh, with support from local NGOs with the requisite experience, provide technical assistance to the identified priority villages to formulate a pro-conservation village development plan. In 2017, the average Village Fund allocation was IDR 800 million per village. Developing pro-conservation or ‘green’ villages could be used as a way to leverage additional funds from local government, private sector and/or NGOs (see next section). USAID LESTARI has already initiated this process in the Katingan–Kahayan Landscape, Central Kalimantan, by supporting five villages to produce Village Mid-term Development Plans (RPJMDes) that include actions to prevent forest fires. Each RPJMDes will be translated into a Village Development Working Plan and both documents then used as the basis for constructing the Village Budget Plan18 to finance these actions. So, it is important that USAID LESTARI share its approach, experiences and lessons learned. Another way to approach this is to go through the provincial government rather than directly to the villages, which might be a more efficient way to achieve scale.

18 https://www.lestari-indonesia.org/wp-content/uploads/2017/04/USAID_LESTARI-CDL-Menangkal-Api-dengan-Dana-Desa.pdf


4) Leveraging private sector support

There are several financing facilities available in Indonesia that are designed to direct private sector investment and blended finance towards sustainable land use activities in order to reduce deforestation and conversion pressure on forest at risk of clearance. These include the Tropical Landscapes Finance Facility19 and Partnerships for Forests20, which support the development of sustainable, deforestation-free business models that aim to enhance forest protection. A key challenge is mobilizing finance towards those areas most vulnerable to driving ongoing encroachment, which are likely to present significant risks and challenges in terms of financing. The greatest potential source of private sector financing to support the conservation of GLNP and Rawa Singkil WR is from the agricultural commodity sector. Many of the international companies identified as having sourcing links to the region and in the agricultural sector more broadly have clear commitments to address their sourcing impacts and achieve deforestation-free supply chains. They also have budgets to reduce production risks and support conservation/sustainable landscapes initiatives in the areas they purchase and/or grow commodities. Numerous agricultural commodities are grown around GLNP and Rawa Singkil WR, including oil palm, coffee, cocoa, pepper and rubber. Oil palm and coffee are of particular importance within the Aceh economy and have both been criticized for driving forest conversion pressure around PAs. Actors along the associated supply chains therefore represent priority potential funding sources for indirect PA financing. There are several opportunities for leveraging PA financing from within the oil palm sector, particularly from companies that are members of the Roundtable on Sustainable Palm Oil (RSPO). These companies are committed to achieving fully certified sustainable supply chains, including from their third-party suppliers. Identifying areas at high risk of forest conversion (or areas currently under illegal production) in the buffer zone and supporting supply chain mapping from third party suppliers back to major exporters can create impetus for major companies to act to reduce these risks (i.e. through enforcing certification of third-party suppliers or by refusing to work in areas of high risk). In addition to the RSPO, many of these companies have also made more stringent commitments to ‘no-deforestation’ and ‘no-peatland’ clearance across their entire supply chains, providing further opportunities for supply chain compliance to support the conservation of GLNP and Rawa Singkil WR. Some of these companies are seeking opportunities to offset their historical environmental impacts by investing in forest protection schemes that are in line with the RSPO’s Remediation and Compensation Procedures (RaCP). A key challenge is ensuring forest protection schemes are regarded as additional21 and in line with RaCP requirements. This raises questions over the feasibility of funding for PAs but could support conservation efforts in their buffer zones.

19 http://tlffindonesia.org/ 20 https://partnershipsforforests.com/ 21 The RaCP require projects under the scheme to be ‘additional’, defined as ‘adding to conservation efforts already planned and funded or executed by the company or other parties and to any measures required anyway by legislation’ (RSPO 2015)


Similar opportunities for private sector financing exist within the coffee sector. A ‘collective responsibility’ approach to address coffee-driven deforestation is being piloted in the landscape around Bukit Barisan Selatan NP in the southern Sumatra province of Lampung, where illegal encroachment for the production of Robusta coffee threatens the park (Box 3). This approach involves a collaboration amongst eight major companies across the coffee supply chain with sourcing links to the region. It provides a model that can be replicated with commodity buyers in GLNP and Rawa Singkil WR. Box 3. A collective responsibility approach for securing private sector support to address commodity-

driven deforestation at the forest frontier

Collective responsibility approaches tackle deforestation with multiple companies at a landscape-level, irrespective of political boundaries. Companies collaborate to support smallholder farmers within their collective supply base, enabling them to mitigate sector risk through a joint focus on high risk, priority area. Companies source from verified areas adjacent to forest boundaries, underpinned by shared, low-cost monitoring and traceability systems, incentivizing deforestation-free production along the forest frontier. Private sector investments are pooled with public sector funding to generate additional incentives, including to support farmer organization, the provision of capital and improved access to markets and inputs. This improves yields, quality and profitability for supply chain actors and creates a ‘commodity fence’ around forest landscapes.


Another approach for leveraging support to directly fund core PA management activities is through NGOs, which have access to other revenue sources, such as private foundations, government overseas aid and individual giving. There are many committed and talented conservation NGOs working in GLNP, Rawa Singkil WR and their buffer zones. Most hold an MOU with the PA management authorities and jointly develop their annual work plans to fit with site priorities. It is therefore important that these partnerships continue to grow because the NGOs, many of whom have operated for over a decade in this landscape, provide enhanced technical assistance for key interventions, such as camera trapping, SMART-based ranger patrols and human-wildlife conflict mitigation. A key challenge with all ‘direct’, rather than ‘indirect’, financing from third parties is whether existing institutional arrangements and legal structures allow for the delivery of this finance to the PAs. Private sector partners would be unlikely to channel money designed to offset impacts or green supply chains in their working landscapes through central government agencies due to concerns over their capacity for efficient financial management and redistribution. Here, an intermediary modality may be needed that takes responsibility for compliance, monitoring and financial disbursement. Often this modality takes the form of a blended revenue fund, that can act both as a holding account for finance from multiple sources and set disbursement criteria for finance within it, often agreed by board members from a number of different agencies and NGOs. While the various forms and structures of blended revenue models are well understood in the conservation context, how this approach could finance PAs in Indonesian is unclear and requires further exploration. Opportunities exist to work with MoEF and BAPPENAS, which is currently exploring sustainable financing options for PAs in Sulawesi (under UNDP/GEF EPASS) and Sumatra (under UNDP/GEF Tiger). In line with the above ‘collective responsibility’ approach and recognizing the opportunities specific to the palm oil sector, we make the following recommendations to leverage private sector support for GLNP and Rawa Singkil WR:

Action 4.1: Initiate a collective responsibility approach for the Leuser Landscape

• Next steps: WCS to formulate a plan for developing this approach and then implement it over 18 months

The approach here would be to conduct a full supply chain investigation to identify coffee, palm oil and other commodity companies sourcing from the landscapes around the GLNP and Rawa Singkil WR and priority areas for specific commodities. This would build on the USAID LESTARI/WCS SOW entitled ‘Investigate the illegal drivers of deforestation, and the fiscal policies incentivizing forest conversion in forest and peatland areas in the Leuser landscape’. Next, the risks facing companies would be quantified by assessing supply chain links, deforestation risk and the sustainability commitments of identified companies and associated buyers (including commitments to the RSPO and ‘no deforestation’ supply chains. This would then enable


engagement with those identified companies to raise awareness of the risks and to create a compelling business case for engagement and establish a joint vision for one of the target landscapes and the basis for a collaborative approach to addressing deforestation and supply chain risks across the landscape. The final step here would be to identify sustainable financing options that could support the joint development of such a vision, e.g. Tropical Landscapes Financing Facility or similar. This approach closely follows the successful efforts, so far, in securing collective responsibility in the Bukit Barisan Selatan landscape. These actions will enable the future development of an incentives and compliance system for communities farming around the forest frontier to reduce future encroachment. Building on lessons from the Bukit Barisan Selatan landscape, company commitments could then be secured to preferentially source verified deforestation-free commodities, based on results of independent monitoring; thereby incentivizing reduced encroachment at the forest frontier.

CONCLUSION To ensure financial sustainability of GLNP and Rawa Singkil WR will require both additional funding and improved financial management efficiency. Although numerous innovative finance generation options exist, operationalizing these typically requires complex and lengthy amendments to either legal or institutional frameworks, which are likely to fall out of the scope of USAID LESTARI and will require strong support from multiple Ministries, such as Environment and Forestry, Finance and BAPPENAS, as well as Parliament. Instead we recommend learning from the successes of MMAF in increasing state budget allocations, combined with work within PAs to improve connections between budget planning and management priorities. In our opinion, this is the most strategic approach to making short-medium terms gains in improving PA financing for GLNP and Rawa Singkil WR. However, we also see benefit in developing options for private sector investment in buffer zones as a way to complement central government funding for inside the PA. Thus, our study presents a costed activity work plan that if adequately funded would be predicted to effectively protect GLNP and Rawa Singkil WR, thereby enabling the GLNP section to be removed from the UNESCO World Heritage Site in-danger list and supporting the Government of Indonesia to meet its national target and global commitment for biodiversity and climate change.


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APPENDIX 1 PA management effectiveness scenarios showing pixels (2x2 km) that must be protected to achieve a minimum target (top) and an optimum target (bottom)


APPENDIX 2 Examples of different options available for the direct and indirect financing for PAs and its buffer zone

Financing option (+partner)

Funding source Funds to PA (direct, indirect)

Directly support PA objectives

Scale of impact (small, med,

large)

Length of funding (short, med, long

term)

$ yield (<1mil, 1-

5mil, >5mil)

Existing mechanism

in place

Ongoing support

Probability of success

PA financing

State budget (MoEF/MinF)

Central govt Direct Yes Large Long $1-5 mil Yes Yes Medium

PNBP reform Central govt Direct Yes Medium Long $1-5 mil No Yes Medium

NGOs NGO Indirect Yes Large Short <$1mil Yes Yes High

Buffer zone financing

Forest Management Unit (Dishut)

Local govt Indirect Yes Medium Medium <$1mil Yes No Medium

Private sector companies Private sector Indirect No Medium Medium $1-5mil No No Medium

Village Fund (Dana Desa) Local govt Indirect Yes Small Short <$1mil Yes No Medium

Trust fund Govt Private sector

Direct Yes Large Long >$5mil No No Medium

Biodiversity offset Private Indirect Yes Medium Short $1-5 mil No No Medium

Green bond (e.g. green sukuk - Islamic bond)

Financial and non-financial institution

Direct Yes Small Short <$1mil Yes Yes High

PES, User pays, Polluter pays

Govt, Private, Individual

Indirect Yes Medium Medium $1-5 mil No No Medium

Environment-related tax scheme

Private Individual

Indirect Yes Large Long $1-5 mil No No Low

USAID LESTARI Wisma GKBI, 12th Floor, #1210

Jl. Jend. Sudirman No. 28, Jakarta 10210, Indonesia

Phone: +62 21 574 0565 Fax: +62 21 574 0566

Email: [email protected] Website: www.lestari-indonesia.org

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IMPROVING PROTECTED AREA FINANCING IN THE LEUSER …